8-K
HOPE BANCORP INC (HOPE)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
April 28, 2020
Date of Report (Date of earliest event reported)
| HOPE BANCORP INC | ||
|---|---|---|
| (Exact name of registrant as specified in its charter) | ||
| Delaware | 000-50245 | 95-4849715 |
| --- | --- | --- |
| (State of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
3200 Wilshire Boulevard, Suite 1400
Los Angeles, California 90010
(Address of principal executives offices, including zip code)
(213) 639-1700
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Common Stock | , | par value $0.001 per share | HOPE | NASDAQ Global Select Market |
|---|---|---|---|---|
| (Title of class) | (Trading Symbol) | (Name of exchange on which registered) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On April 28, 2020, Hope Bancorp, Inc. (“HOPE” or the “Company”) issued a news release concerning its results of operations and financial condition for the first quarter ended and as of March 31, 2020. A copy of the April 28, 2020 press release is attached hereto as Exhibit 99.1.
Item 8.01 Other Events.
On April 28, 2020, the Company issued a news release announcing that its Board of Directors declared a quarterly cash dividend of $0.14 per common share. The cash dividend is payable on or about May 22, 2020 to all stockholders of record as of the close of business on May 8, 2020. A copy of the April 28, 2020 press release is attached hereto as Exhibit 99.2.
Item 7.01. Regulation FD Disclosure
The Company previously announced that it will host an investor conference call on Wednesday, April 29, 2020 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its first quarter ended March 31, 2020. A presentation to accompany the conference call, which contains certain historical and forward-looking information relating to the Company (the “Presentation Materials”), has been made available at the Investor Relations section of Hope Bancorp’s website at www.ir-hopebancorp.com. A copy of the Presentation Materials is attached hereto as Exhibit 99.3.
The information included in this report pursuant to Item 2.02, Item 8.01 and Item 7.01 of Form 8-K (including Exhibit 99.1, Exhibit 99.2 and Exhibit 99.3) shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.
The following risk factor supplements the “Risk Factors” section in our 2019 Form 10-K.
The COVID-19 pandemic has had a material and adverse impact on our business, financial condition and results of operations, and the further impact will depend on future developments that cannot be predicted, including the scope and duration of the pandemic, the economic implications of the same, and the actions taken by governmental authorities in response to the pandemic.
The novel COVID-19 pandemic has substantially and negatively impacted the United States economy, disrupted global supply chains, considerably lowered equity market valuations, created significant volatility and disruption in financial markets, and materially increased unemployment levels. In addition, the pandemic has resulted in temporary closures of countless businesses and the institution of social distancing and sheltering in place requirements in most states and communities. As a result, the demand for our products and services has been and likely will continue to be significantly adversely impacted, which could materially and adversely affect our financial condition and results of operations. Furthermore, the pandemic could result in the recognition of amplified credit losses in our loan portfolios and increases in our allowance for loan losses, particularly if businesses remain closed and our customers draw on their lines of credit. Similarly, because of changing economic and market conditions, we may be required to recognize impairments on goodwill or the securities we hold. Our business operations may also be further disrupted if significant portions of our workforce are unable to work effectively, including because of challenges arising as a result of circumstances related to working from home, illness, quarantines, government actions, or other restrictions in connection with the pandemic, and we have already temporarily closed certain of our branches. In response to the pandemic, we have also suspended residential property foreclosure sales, evictions, and involuntary automobile repossessions, and are offering payment deferrals and other expanded assistance for credit card, mortgage and small business lending customers, and future governmental actions may require these and other types of customer-related responses. In addition, we may take capital actions in response to the COVID-19 pandemic. The extent to which the COVID-19 pandemic continues to impact our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments that cannot be predicted, including the scope and duration of the pandemic, the economic implications of the same and actions taken by governmental authorities and other third parties in response to the pandemic.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
| Exhibit No. | Description of Exhibit |
|---|---|
| 99.1 | News release, dated April 28, 2020, concerning the results of operations and financial condition for the first quarter ended and as of March 31, 2020. |
| 99.2 | News release, dated April 28, 2020, announcing the declaration of a quarter cash dividend. |
| 99.3 | Presentation Materials, dated April 29, 2020. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| HOPE BANCORP, INC. | ||
|---|---|---|
| Date: April 29, 2020 | By: | /s/ Kevin S. Kim |
| Kevin S. Kim | ||
| Chairman, President and Chief Executive Officer |
EXHIBIT INDEX
| Exhibit No. | Description of Exhibit |
|---|---|
| 99.1 | News release, dated April 28, 2020, concerning the results of operations and financial condition for the first quarter ended and as of March 31, 2020. |
| 99.2 | News release, dated April 28, 2020, announcing the declaration of a quarterly cash dividend. |
| 99.3 | Presentation Materials, dated April 29, 2020. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
Exhibit
News Release
HOPE BANCORP REPORTS 2020 FIRST QUARTER FINANCIAL RESULTS
LOS ANGELES - April 28, 2020 - Hope Bancorp, Inc. (the “Company”) (NASDAQ: HOPE), the holding company of Bank of Hope (the “Bank”), today reported unaudited financial results for its first quarter ended March 31, 2020.
For the three months ended March 31, 2020, net income totaled $26.0 million, or $0.21 per diluted common share, reflecting the Company’s implementation of the Current Expected Credit Losses (“CECL”) methodology, which incorporates a significant deterioration in the future economic outlook due to the COVID-19 pandemic. This led to a quarterly provision for credit losses of $28.0 million. This compares with net income of $43.0 million, or $0.34 per diluted common share, in the 2019 fourth quarter and $42.8 million, or $0.34 per diluted common share, in the 2019 first quarter. The provision for credit losses, under the former incurred loss methodology, amounted to $1.0 million and $3.0 million, respectively, for the comparable 2019 fourth quarter and 2019 first quarter.
“Overall, our 2020 first quarter results reflect a solid quarter of operational performance marked by continued progress with strategic initiatives designed to strengthen our organization from an enterprise risk management perspective,” said Kevin S. Kim, Chairman, President and Chief Executive Officer of Hope Bancorp, Inc. “We continued to see a positive shift in our deposit mix favoring lower cost core deposits, which contributed to a 15 basis point reduction in our total cost of deposits. This led to a 15 basis point expansion of our net interest margin as reported and an 8 basis point expansion on a core basis, excluding purchase accounting accretion. New loan origination volumes were robust for the seasonally slower first quarter totaling $625 million and representing a well diversified mix of commercial real estate, commercial and consumer loans. This led to a 10% increase in our loans receivable quarter-over-quarter on an annualized basis.
“The COVID-19 crisis has created an extremely challenging business environment with unprecedented levels of uncertainties as to the magnitude and duration of the pandemic, as well as the depth to which this will push our economy into a recession. However, we entered the pandemic crisis with very strong capital, robust liquidity, and excellent credit quality, which supports our confidence in our ability to navigate the difficult landscape. Our hearts go out to all who have been impacted by COVID-19. All of us at Bank of Hope stand united and committed to do all that we can to support our customers, our communities and our nation as we work tirelessly to get through this together.”
Q1 2020 Highlights
| • | Pre-tax, pre-provision income increased 8% quarter-over quarter. |
|---|---|
| • | Strong new loan originations of $625 million led to a 2.5% increase in loans receivable quarter-over-quarter, or 10% annualized. |
| --- | --- |
| • | Total deposits increased 2.5% quarter-over-quarter, or 10% annualized. |
| --- | --- |
| • | Continuation of favorable mix-shift to lower cost core deposits contributed to a 15 basis point reduction quarter-over-quarter in total deposit costs. |
| --- | --- |
| • | NIM expansion of 15 basis points on a reported basis and 8 basis points on a core basis, excluding purchase accounting accretion. |
| --- | --- |
| • | Total noninterest expenses well contained and remain at 1.87% of average assets. |
| --- | --- |
| • | Allowance for credit losses increased substantially from 0.77% of loans receivable at December 31, 2019 to 1.15% at March 31, 2020, reflecting the implementation of the CECL standards and COVID-19 related uncertainties. |
| --- | --- |
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Financial Highlights
| (dollars in thousands, except per share data) (unaudited) | At or for the Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 3/31/2020 | 12/31/2019 | 3/31/2019 | |||||||
| Net income | $ | 25,953 | $ | 43,009 | $ | 42,758 | |||
| Diluted earnings per share | $ | 0.21 | $ | 0.34 | $ | 0.34 | |||
| Net interest income before provision for credit losses | $ | 119,291 | $ | 113,508 | $ | 119,608 | |||
| Net interest margin | 3.31 | % | 3.16 | % | 3.39 | % | |||
| Noninterest income | $ | 13,264 | $ | 12,979 | $ | 11,422 | |||
| Noninterest expense | $ | 72,140 | $ | 70,429 | $ | 70,833 | |||
| Pre-tax pre-provision income ^(1)^ | $ | 60,415 | $ | 56,058 | $ | 60,197 | |||
| Net loans receivable | $ | 12,438,493 | $ | 12,181,863 | $ | 11,959,787 | |||
| Deposits | $ | 12,836,567 | $ | 12,527,364 | $ | 12,249,196 | |||
| Nonaccrual loans ^(2) (3)^ | $ | 72,639 | $ | 54,785 | $ | 86,637 | |||
| Nonperforming loans to loans receivable ^(2) (3)^ | 0.94 | % | 0.80 | % | 1.10 | % | |||
| ACL to loans receivable^(4)^ | 1.15 | % | 0.77 | % | 0.78 | % | |||
| ACL to nonaccrual loans ^(2) (3) (4)^ | 199.51 | % | 171.84 | % | 108.75 | % | |||
| ACL to nonperforming assets ^(2) (3) (4)^ | 102.11 | % | 77.08 | % | 68.03 | % | |||
| Provision for credit losses | $ | 28,000 | $ | 1,000 | $ | 3,000 | |||
| Net charge offs | $ | 3,421 | $ | 738 | $ | 462 | |||
| Return on average assets (“ROA”) | 0.67 | % | 1.13 | % | 1.12 | % | |||
| Return on average equity (“ROE”) | 5.12 | % | 8.46 | % | 8.91 | % | |||
| Return on average common tangible equity (“ROTCE”) ^(5)^ | 6.69 | % | 11.04 | % | 11.86 | % | |||
| Noninterest expense / average assets | 1.87 | % | 1.85 | % | 1.85 | % | |||
| Efficiency ratio | 54.42 | % | 55.68 | % | 54.06 | % |
^(1)^ Pre-tax pre-provision income is a non-GAAP financial measure. A reconciliation of the Company’s pre-tax pre-provision income is provided in the accompanying financial information on Table Page 9.
^(2)^ Excludes delinquent SBA loans that are guaranteed and currently in liquidation.
^(3)^ Excludes purchased credit impaired (“PCI”) loans for December 31, 2019 and March 31, 2019.
^(4)^ Allowance for credit losses as of March 31, 2020 was calculated under the CECL methodology while allowance for loan losses for prior periods were calculated under the incurred loss methodology.
^(5)^ Return on average tangible common equity is a non-GAAP financial measure. A reconciliation of the Company’s return on average tangible common equity is provided in the accompanying financial information on Table Page 9.
Operating Results for the 2020 First Quarter
Net interest income before provision for credit losses for the 2020 first quarter totaled $119.3 million, compared with $113.5 million in the 2019 fourth quarter and $119.6 million in the year-ago first quarter. A large payoff of an acquired loan contributed $5.6 million in purchase accounting discount accretion.
The net interest margin for the 2020 first quarter increased 15 basis points to 3.31% from 3.16% in the 2019 fourth quarter. The increase in reported net interest margin was largely due to the above mentioned acquired loan payoff which benefited the 2020 first quarter net interest margin. On a core basis, net interest margin excluding the impact of acquisition accounting adjustments increased 8 basis points for the 2020 first quarter compared to the 2019 fourth quarter due to a reduction in deposits costs.
The weighted average yield on loans for the 2020 first quarter was 5.06%, compared with 5.04% in the preceding fourth quarter and 5.31% in the year-ago first quarter.
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3-3-3 NASDAQ: HOPE
The Company continued to see benefits from a positive shift in the mix of deposits favoring lower-cost money market and other deposits. This contributed to a quarter-over-quarter 15 basis point decrease in the weighted average cost of deposits, which was 1.34% for the 2020 first quarter, compared with 1.49% for the 2019 fourth quarter. In the year-ago first quarter, total cost of deposits was 1.57%.
Noninterest income totaled $13.3 million for the 2020 first quarter, compared with $13.0 million for the preceding fourth quarter and $11.4 million for the 2019 first quarter. Aside from normal fluctuations in noninterest income categories, the variance reflects the net gains on sales of other loans, representing the sale of residential mortgage loans, which amounted to $1.9 million, $1.9 million and $741,000 for the 2020 first quarter, 2019 fourth quarter and 2019 first quarter, respectively.
Noninterest expense was fairly stable at $72.1 million for the 2020 first quarter, compared with $70.4 million for the preceding fourth quarter and $70.8 million for the year-ago first quarter. Noninterest expense as a percentage of average assets amounted to 1.87% for the 2020 first quarter, compared with 1.85% for the 2019 fourth quarter and 2019 first quarter.
The quarter-over-quarter increase in noninterest expense for the 2020 first quarter reflects an increase in compensation expense, normalization of the Company’s FDIC assessment expense and higher OREO expenses. This increase was partially offset by decreases in professional fees and advertising and marketing expenses.
Salaries and employee benefits expense increased to $42.5 million for the 2020 first quarter from $39.8 million for the 2019 fourth quarter, largely reflecting payroll taxes and higher seasonal expenses related to the Company’s 401(k) program. In the 2019 first quarter, salaries and employee benefits expense totaled $40.4 million.
The effective tax rate for the 2020 first quarter was 19.9%, reflecting a significant reduction in the projected pre-tax book income for 2020. The effective tax rate for the preceding 2019 fourth quarter was 21.9% and 25.2% in the 2019 first quarter.
Balance Sheet Summary
New loan originations funded during the 2020 first quarter totaled $624.5 million and included SBA loan production of $49.8 million and residential mortgage loan originations of $37.4 million. This compares with 2019 fourth quarter originations of $847.6 million, including SBA loan production of $61.8 million and residential mortgage loan originations of $64.2 million. In the year-ago first quarter, new loan originations funded totaled $442.0 million, including SBA loan production of $48.0 million and residential mortgage loan originations of $64.3 million.
SBA 7(a) loan originations totaled $21.7 million for the 2020 first quarter, compared with $46.1 million for the fourth quarter of 2019 and $33.0 million for the year-ago first quarter. There have been no sales of SBA 7(a) loans to the secondary market since the Company’s decision to retain such loans in its portfolio during the 2018 fourth quarter.
At March 31, 2020, loans receivable increased 2.5% to $12.58 billion from $12.28 billion at December 31, 2019 and increased 4.4% from $12.05 billion at March 31, 2019.
Total deposits at March 31, 2020 increased 2.5% to $12.84 billion from $12.53 billion at December 31, 2019 and increased 4.8% from $12.25 billion at March 31, 2019, continuing a year-long positive shift in the mix of deposits favoring core money market and other deposits and decreases in higher-cost time deposits.
Following is the deposit composition as of March 31, 2020, December 31, 2019 and March 31, 2019:
| (dollars in thousands) (unaudited) | 3/31/2020 | 12/31/2019 | % change | 3/31/2019 | % change | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Noninterest bearing demand deposits | $ | 3,010,143 | $ | 3,108,687 | (3 | )% | $ | 2,948,751 | 2 | % |
| Money market and other | 4,851,000 | 3,985,556 | 22 | % | 3,086,920 | 57 | % | |||
| Saving deposits | 272,577 | 274,151 | (1 | )% | 223,562 | 22 | % | |||
| Time deposits | 4,702,847 | 5,158,970 | (9 | )% | 5,989,963 | (21 | )% | |||
| Total deposit balances | $ | 12,836,567 | $ | 12,527,364 | 2 | % | $ | 12,249,196 | 5 | % |
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Reflecting the continued favorable mix-shift in deposits, total cost of deposits decreased 15 basis points to 1.34% from 1.49% for the 2019 fourth quarter and decreased 23 basis points from 1.57% for the 2019 first quarter.
Allowance for Credit Losses
The 2020 first quarter provision for credit losses under the CECL methodology was $28.0 million. This compares with a provision for loan losses under the prior incurred loss methodology of $1.0 million for the 2019 fourth quarter and $3.0 million for the year-ago first quarter.
The Company adopted the new CECL accounting standard effective as of January 1, 2020 and recognized a Day 1 adjustment of its Allowance for Credit Losses (“ACL”) of $26.2 million. The $28.0 million provision for credit losses reflects updated macroeconomic variables incorporating the Moody’s Analytics Baseline V2 scenario published March 27, 2020, which incorporates the effect of the COVID-19 pandemic.
The ACL as of March 31, 2020 totaled $144.9 million, compared with $94.1 million at December 31, 2019 and $94.2 million at March 31, 2019. As a percentage of loans receivable (excluding loans held for sale), the ACL was 1.15%, 0.77% and 0.78% at March 31, 2020, December 31, 2019 and March 31, 2019, respectively. The coverage ratio of the ACL to nonperforming loans was 121.90% at March 31, 2020, 96.03% at December 31, 2019 and 71.25% at March 31, 2019.
| (unaudited) | (dollars in thousands) | ||
|---|---|---|---|
| Allowance for loan losses - Dec 31, 2019 | $ | 94,144 | |
| CECL day 1 adoption impact | 26,200 | ||
| Allowance for credit losses - Jan 1, 2020 | 120,344 | ||
| Provision for credit losses | 28,000 | ||
| Recoveries | 2,536 | ||
| Charge offs | (5,957 | ) | |
| Allowance for credit losses - Mar 31, 2020 | $ | 144,923 |
Credit Quality
Following are the components of nonperforming assets as of March 31, 2020, December 31, 2019 and March 31, 2019:
| (dollars in thousands) (unaudited) | 3/31/2020 | 12/31/2019 | 3/31/2019 | |||
|---|---|---|---|---|---|---|
| Loans on nonaccrual status ^(1)^ | $ | 72,639 | $ | 54,785 | $ | 86,637 |
| Delinquent loans 90 days or more on accrual status ^(2)^ | 387 | 7,547 | 387 | |||
| Accruing troubled debt restructured loans | 45,860 | 35,709 | 45,204 | |||
| Total nonperforming loans | 118,886 | 98,041 | 132,228 | |||
| Other real estate owned | 23,039 | 24,091 | 6,258 | |||
| Total nonperforming assets | $ | 141,925 | $ | 122,132 | $ | 138,486 |
| ^(1)^ | Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $28.8 million, $28.1 million and $30.5 million, at March 31, 2020, December 31, 2019 and March 31, 2019, respectively. | |||||
| --- | --- | |||||
| ^(2)^ | Excludes PCI loans totaling $13.2 million and $18.4 million, at December 31, 2019 and March 31, 2019, respectively. | |||||
| --- | --- |
The Company attributed $14.7 million of the increase in loans on nonaccrual status to the reclassification of PCD (formerly purchased credit-impaired loans) due to the implementation of the new CECL accounting standards.
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5-5-5 NASDAQ: HOPE
Following are the components of criticized loan balances as of March 31, 2020, December 31, 2019 and March 31, 2019:
| (dollars in thousands) (unaudited) | 3/31/2020 | 12/31/2019 | 3/31/2019 | |||
|---|---|---|---|---|---|---|
| Special Mention | $ | 122,279 | $ | 141,452 | $ | 205,373 |
| Classified | 278,783 | 259,291 | 353,202 | |||
| Criticized | $ | 401,062 | $ | 400,743 | $ | 558,575 |
During the 2020 first quarter, the Company recorded net charge offs of $3.4 million, or 0.11% of average loans receivable on an annualized basis. Net charge offs for the 2019 fourth quarter totaled $738,000, or 0.02% of average loans receivable on an annualized basis. For the 2019 first quarter, the Company recorded net charge offs of $462,000, or 0.02% of average loans receivable on an annualized basis.
Impaired loans (defined as loans for which it is probable that not all principal and interest payments due will be collected in accordance with the contractual terms) totaled $120.8 million at March 31, 2020. This compares with impaired loans of $90.5 million at December 31, 2019 and $132.2 million at March 31, 2019. The Company attributed $22.2 million of the increase in impaired loans in the 2020 first quarter to the reclassification of PCD (formerly purchased credit-impaired loans) due to the implementation of the new CECL accounting standards.
Capital
At March 31, 2020, the Company and the Bank continued to exceed all regulatory capital requirements to be classified as a “well-capitalized” financial institution. Following are capital ratios for the Company as of March 31, 2020, December 31, 2019 and March 31, 2019:
| Hope Bancorp, Inc. (unaudited) | 3/31/2020 | 12/31/2019 | 3/31/2019 | Minimum Guideline for “Well-Capitalized” Bank |
|---|---|---|---|---|
| Common Equity Tier 1 Capital | 11.44% | 11.76% | 11.59% | 6.50% |
| Tier 1 Leverage Ratio | 10.88% | 11.22% | 10.66% | 5.00% |
| Tier 1 Risk-Based Ratio | 12.19% | 12.51% | 12.36% | 8.00% |
| Total Risk-Based Ratio | 13.08% | 13.23% | 13.10% | 10.00% |
With the adoption of the CECL standard on January 1, 2020, the Company recorded a Day 1 adjustment, net of taxes to retained earnings. In accordance with the revised regulatory CECL transition guidance, the Company has elected to defer the impact of the adoption of CECL for two years, at which time the impact will be phased-in over a three year period. Therefore, the Day 1 CECL adjustment did not have an impact to the Company’s regulatory capital ratios as of March 31, 2020.
Following are tangible common equity (“TCE”) per share and TCE as a percentage of tangible assets as of March 31, 2020, December 31, 2019 and March 31, 2019:
| (unaudited) | 3/31/2020 | 12/31/2019 | 3/31/2019 |
|---|---|---|---|
| Tangible common equity per share ^(1)^ | $12.52 | $12.40 | $11.59 |
| Tangible common equity to tangible assets ^(2)^ | 9.92% | 10.27% | 9.84% |
| ^(1)^ | Tangible common equity represents common equity less goodwill and net other intangible assets. Tangible common equity per share represents tangible common equity divided by the number of shares issued and outstanding. Both tangible common equity and tangible common equity per share are non-GAAP financial measures. A reconciliation of the Company’s total stockholders’ equity to tangible common equity is provided in the accompanying financial information on Table Page 9. | ||
| --- | --- | ||
| ^(2)^ | Tangible assets represent total assets less goodwill and net other intangible assets. Tangible common equity to tangible assets is the ratio of tangible common equity over tangible assets. Tangible common equity to tangible assets is a non-GAAP financial measure. A reconciliation of the Company’s total assets to tangible assets is provided in the accompanying financial information on Table Page 9. | ||
| --- | --- |
Management reviews tangible common equity to tangible assets ratio in evaluating the Company’s and the Bank’s capital levels and has included these figures and tangible common equity per share figures in response to market participant interest in tangible common equity as a measure of capital. A reconciliation of the GAAP to non-GAAP financial measures is provided in the accompanying financial information.
Stock Repurchase Plan
During the 2020 first quarter, the Company repurchased 2,716,034 shares at an average price of $13.32, completing its $50 million stock repurchase program announced on July 16, 2019. The Company does not have any plans to implement another share repurchase program at this time.
Investor Conference Call
The Company previously announced that it will host an investor conference call on Wednesday, April 29, 2020 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its first quarter ended March 31, 2020. Investors and analysts are invited to access the conference call by dialing 866-235-9917 (domestic) or 412-902-4103 (international) and asking for the “Hope Bancorp Call.” A presentation to accompany the earnings call will be available at the Investor Relations section of Hope Bancorp’s website at www.ir-hopebancorp.com. Other interested parties are invited to listen to a live webcast of the call available at the Investor Relations section of Hope Bancorp’s website. After the live webcast, a replay will remain available in the Investor Relations section of Hope Bancorp’s website for one year. A telephonic replay of the call will be available at 877-344-7529 (domestic) or 412-317-0088 (international) for one week through May 6, 2020, replay access code 10142677.
About Hope Bancorp, Inc.
Hope Bancorp, Inc. is the holding company of Bank of Hope, the first and only super regional Korean-American bank in the United States with $16.0 billion in total assets as of March 31, 2020. Headquartered in Los Angeles and serving a multi-ethnic population of customers across the nation, Bank of Hope operates 58 full-service branches in California, Washington, Texas, Illinois, New York, New Jersey, Virginia, Georgia and Alabama. The Bank also operates SBA loan production offices in Seattle, Denver, Dallas, Atlanta, Portland, Oregon, New York City, Northern California and Houston; commercial loan production offices in Northern California and Seattle; residential mortgage loan production offices in Southern California; and a representative office in Seoul, Korea. Bank of Hope specializes in core business banking products for small and medium-sized businesses, with an emphasis in commercial real estate and commercial lending, SBA lending and international trade financing. Bank of Hope is a California-chartered bank, and its deposits are insured by the FDIC to the extent provided by law. Bank of Hope is an Equal Opportunity Lender. For additional information, please go to bankofhope.com. By including the foregoing website address link, the Company does not intend to and shall not be deemed to incorporate by reference any material contained or accessible therein.
Forward-Looking Statements
Some statements in this press release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to, among other things, expectations regarding the business environment in which we operate, projections of future performance, perceived opportunities in the market and statements regarding our business strategies, objectives and vision. Forward-looking statements include, but are not limited to, statements preceded by, followed by or that include the words “will,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions. With respect to any such forward-looking statements, the Company claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. The Company’s actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in any forward-looking statements. The risks and uncertainties include, but are not limited to: possible deterioration in economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; the failure of or changes to assumptions and estimates underlying the Company’s allowances for credit losses, regulatory risks associated with current and future regulations, and the COVID-19 pandemic and its impact on our financial position, results of operations, liquidity, and capitalization. For additional information concerning these and other risk factors, see the Company’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
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6-6-6 NASDAQ: HOPE
Contacts:
| Alex Ko<br><br>EVP & Chief Financial Officer<br><br>213-427-6560<br><br>alex.ko@bankofhope.com | Angie Yang<br><br>SVP, Director of Investor Relations &<br><br>Corporate Communications<br><br>213-251-2219<br><br>angie.yang@bankofhope.com |
|---|
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(tables follow)
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share data)
| Assets: | 3/31/2020 | 12/31/2019 | % change | 3/31/2019 | % change | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash and due from banks | $ | 802,033 | $ | 698,567 | 15 | % | $ | 612,884 | 31 | % | |||
| Securities available for sale, at fair value | 1,718,702 | 1,715,987 | — | % | 1,818,343 | (5 | )% | ||||||
| Federal Home Loan Bank (“FHLB”) stock and other investments | 96,956 | 97,659 | (1 | )% | 102,594 | (5 | )% | ||||||
| Loans held for sale, at the lower of cost or fair value | 8,281 | 54,271 | (85 | )% | 921 | 799 | % | ||||||
| Loans receivable | 12,583,416 | 12,276,007 | 3 | % | 12,054,004 | 4 | % | ||||||
| Allowance for credit losses | (144,923 | ) | (94,144 | ) | 54 | % | (94,217 | ) | 54 | % | |||
| Net loans receivable | 12,438,493 | 12,181,863 | 2 | % | 11,959,787 | 4 | % | ||||||
| Accrued interest receivable | 30,450 | 30,772 | (1 | )% | 34,831 | (13 | )% | ||||||
| Premises and equipment, net | 51,392 | 52,012 | (1 | )% | 53,218 | (3 | )% | ||||||
| Bank owned life insurance | 76,429 | 76,339 | — | % | 75,586 | 1 | % | ||||||
| Goodwill | 464,450 | 464,450 | — | % | 464,450 | — | % | ||||||
| Servicing assets | 14,847 | 16,417 | (10 | )% | 21,407 | (31 | )% | ||||||
| Other intangible assets, net | 11,302 | 11,833 | (4 | )% | 13,504 | (16 | )% | ||||||
| Other assets | 308,099 | 267,270 | 15 | % | 241,144 | 28 | % | ||||||
| Total assets | $ | 16,021,434 | $ | 15,667,440 | 2 | % | $ | 15,398,669 | 4 | % | |||
| Liabilities: | |||||||||||||
| Deposits | $ | 12,836,567 | $ | 12,527,364 | 2 | % | $ | 12,249,196 | 5 | % | |||
| FHLB advances | 675,000 | 625,000 | 8 | % | 720,000 | (6 | )% | ||||||
| Convertible notes, net | 200,716 | 199,458 | 1 | % | 195,754 | 3 | % | ||||||
| Subordinated debentures | 103,318 | 103,035 | — | % | 102,201 | 1 | % | ||||||
| Accrued interest payable | 30,436 | 33,810 | (10 | )% | 37,511 | (19 | )% | ||||||
| Other liabilities | 157,309 | 142,762 | 10 | % | 147,796 | 6 | % | ||||||
| Total liabilities | $ | 14,003,346 | $ | 13,631,429 | 3 | % | $ | 13,452,458 | 4 | % | |||
| Stockholders’ Equity: | |||||||||||||
| Common stock, $0.001 par value | $ | 136 | $ | 136 | — | % | $ | 136 | — | % | |||
| Capital surplus | 1,429,275 | 1,428,066 | — | % | 1,424,029 | — | % | ||||||
| Retained earnings | 752,228 | 762,480 | (1 | )% | 687,404 | 9 | % | ||||||
| Treasury stock, at cost | (200,000 | ) | (163,820 | ) | (22 | )% | (150,000 | ) | (33 | )% | |||
| Accumulated other comprehensive gain (loss), net | 36,449 | 9,149 | 298 | % | (15,358 | ) | N/A | ||||||
| Total stockholders’ equity | 2,018,088 | 2,036,011 | (1 | )% | 1,946,211 | 4 | % | ||||||
| Total liabilities and stockholders’ equity | $ | 16,021,434 | $ | 15,667,440 | 2 | % | $ | 15,398,669 | 4 | % | |||
| Common stock shares - authorized | 150,000,000 | 150,000,000 | 150,000,000 | ||||||||||
| Common stock shares - outstanding | 123,169,404 | 125,756,543 | 126,635,584 | ||||||||||
| Treasury stock shares | 12,661,581 | 9,945,547 | 9,002,453 |
Table Page 1
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
| Three Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3/31/2020 | 12/31/2019 | % change | 3/31/2019 | % change | ||||||||
| Interest income: | ||||||||||||
| Interest and fees on loans | $ | 154,230 | $ | 152,795 | 1 | % | $ | 158,136 | (2 | )% | ||
| Interest on securities | 10,609 | 10,737 | (1 | )% | 12,319 | (14 | )% | |||||
| Interest on federal funds sold and other investments | 2,029 | 2,241 | (9 | )% | 2,675 | (24 | )% | |||||
| Total interest income | 166,868 | 165,773 | 1 | % | 173,130 | (4 | )% | |||||
| Interest expense: | ||||||||||||
| Interest on deposits | 41,113 | 45,428 | (9 | )% | 46,847 | (12 | )% | |||||
| Interest on other borrowings and convertible notes | 6,464 | 6,837 | (5 | )% | 6,675 | (3 | )% | |||||
| Total interest expense | 47,577 | 52,265 | (9 | )% | 53,522 | (11 | )% | |||||
| Net interest income before provision for credit losses | 119,291 | 113,508 | 5 | % | 119,608 | — | % | |||||
| Provision for credit losses | 28,000 | 1,000 | 2,700 | % | 3,000 | 833 | % | |||||
| Net interest income after provision for credit losses | 91,291 | 112,508 | (19 | )% | 116,608 | (22 | )% | |||||
| Noninterest income: | ||||||||||||
| Service fees on deposit accounts | 4,133 | 4,510 | (8 | )% | 4,317 | (4 | )% | |||||
| Net gains on sales of other loans | 1,855 | 1,876 | (1 | )% | 741 | 150 | % | |||||
| Other income and fees | 7,276 | 6,593 | 10 | % | 6,364 | 14 | % | |||||
| Total noninterest income | 13,264 | 12,979 | 2 | % | 11,422 | 16 | % | |||||
| Noninterest expense: | ||||||||||||
| Salaries and employee benefits | 42,502 | 39,841 | 7 | % | 40,429 | 5 | % | |||||
| Occupancy | 7,410 | 7,516 | (1 | )% | 7,677 | (3 | )% | |||||
| Furniture and equipment | 4,259 | 4,260 | — | % | 3,446 | 24 | % | |||||
| Advertising and marketing | 1,673 | 2,462 | (32 | )% | 2,062 | (19 | )% | |||||
| Data processing and communications | 2,631 | 2,416 | 9 | % | 2,956 | (11 | )% | |||||
| Professional fees | 3,300 | 5,948 | (45 | )% | 5,380 | (39 | )% | |||||
| FDIC assessment | 1,559 | 772 | 102 | % | 1,551 | 1 | % | |||||
| Credit related expenses | 1,662 | 1,717 | (3 | )% | 678 | 145 | % | |||||
| OREO (income) expense, net | 843 | (122 | ) | N/A | (152 | ) | N/A | |||||
| Other | 6,301 | 5,619 | 12 | % | 6,806 | (7 | )% | |||||
| Total noninterest expense | 72,140 | 70,429 | 2 | % | 70,833 | 2 | % | |||||
| Income before income taxes | 32,415 | 55,058 | (41 | )% | 57,197 | (43 | )% | |||||
| Income tax provision | 6,462 | 12,049 | (46 | )% | 14,439 | (55 | )% | |||||
| Net income | $ | 25,953 | $ | 43,009 | (40 | )% | $ | 42,758 | (39 | )% | ||
| Earnings Per Common Share: | ||||||||||||
| Basic | $ | 0.21 | $ | 0.34 | $ | 0.34 | ||||||
| Diluted | $ | 0.21 | $ | 0.34 | $ | 0.34 | ||||||
| Weighted Average Shares Outstanding: | ||||||||||||
| Basic | 124,295,327 | 126,410,924 | 126,640,464 | |||||||||
| Diluted | 124,676,296 | 126,835,273 | 126,819,672 |
Table Page 2
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
| For the Three Months Ended<br><br>(Annualized) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Profitability measures: | 3/31/2020 | 12/31/2019 | 3/31/2019 | ||||||
| ROA | 0.67 | % | 1.13 | % | 1.12 | % | |||
| ROE | 5.12 | % | 8.46 | % | 8.91 | % | |||
| ROTCE ^(1)^ | 6.69 | % | 11.04 | % | 11.86 | % | |||
| Net interest margin | 3.31 | % | 3.16 | % | 3.39 | % | |||
| Efficiency ratio | 54.42 | % | 55.68 | % | 54.06 | % | |||
| Noninterest expense / average assets | 1.87 | % | 1.85 | % | 1.85 | % | |||
| ^(1)^Average tangible equity is calculated by subtracting average goodwill and average core deposit intangible assets from average stockholders’ equity. This is a non-GAAP measure that we<br><br>believe provides investors with information that is useful in understanding our financial performance and position. | |||||||||
| Three Months Ended | |||||||||
| Pre-tax acquisition accounting adjustments and merger-related expenses: | 3/31/2020 | 12/31/2019 | 3/31/2019 | ||||||
| Accretion on purchased non-impaired loans | $ | 1,059 | $ | 1,945 | $ | 2,166 | |||
| Accretion on purchased credit deteriorated/purchased credit impaired loans | 9,449 | 5,958 | 5,833 | ||||||
| Amortization of premium on low income housing tax credits | (71 | ) | (76 | ) | (76 | ) | |||
| Amortization of premium on acquired FHLB borrowings | — | — | 1,280 | ||||||
| Accretion of discount on acquired subordinated debt | (282 | ) | (281 | ) | (273 | ) | |||
| Amortization of core deposit intangibles | (531 | ) | (557 | ) | (557 | ) | |||
| Total acquisition accounting adjustments | $ | 9,624 | $ | 6,989 | $ | 8,373 |
Table Page 3
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Three Months Ended | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3/31/2020 | 12/31/2019 | 3/31/2019 | ||||||||||||||||
| Interest | Annualized | Interest | Annualized | Interest | Annualized | |||||||||||||
| Average | Income/ | Average | Average | Income/ | Average | Average | Income/ | Average | ||||||||||
| Balance | Expense | Yield/Cost | Balance | Expense | Yield/Cost | Balance | Expense | Yield/Cost | ||||||||||
| INTEREST EARNING ASSETS: | ||||||||||||||||||
| Loans, including loans held for sale | $ | 12,259,848 | $ | 154,230 | 5.06 | % | $ | 12,036,477 | $ | 152,795 | 5.04 | % | $ | 12,088,169 | $ | 158,136 | 5.31 | % |
| Securities available for sale | 1,712,033 | 10,609 | 2.49 | % | 1,755,887 | 10,737 | 2.43 | % | 1,827,612 | 12,319 | 2.73 | % | ||||||
| FHLB stock and other investments | 519,309 | 2,029 | 1.57 | % | 463,615 | 2,241 | 1.92 | % | 405,660 | 2,675 | 2.67 | % | ||||||
| Total interest earning assets | $ | 14,491,190 | $ | 166,868 | 4.63 | % | $ | 14,255,979 | $ | 165,773 | 4.61 | % | $ | 14,321,441 | $ | 173,130 | 4.90 | % |
| INTEREST BEARING LIABILITIES: | ||||||||||||||||||
| Deposits: | ||||||||||||||||||
| Demand, interest bearing | $ | 4,204,406 | $ | 14,880 | 1.42 | % | $ | 3,682,300 | $ | 14,924 | 1.61 | % | $ | 3,042,524 | $ | 12,987 | 1.73 | % |
| Savings | 274,075 | 808 | 1.19 | % | 265,008 | 748 | 1.12 | % | 223,531 | 565 | 1.03 | % | ||||||
| Time deposits | 4,900,405 | 25,425 | 2.09 | % | 5,148,092 | 29,756 | 2.29 | % | 5,936,842 | 33,295 | 2.27 | % | ||||||
| Total interest bearing deposits | 9,378,886 | 41,113 | 1.76 | % | 9,095,400 | 45,428 | 1.98 | % | 9,202,897 | 46,847 | 2.06 | % | ||||||
| FHLB advances | 594,890 | 2,647 | 1.79 | % | 608,052 | 2,921 | 1.91 | % | 810,857 | 2,614 | 1.31 | % | ||||||
| Convertible notes | 199,960 | 2,346 | 4.64 | % | 198,669 | 2,334 | 4.60 | % | 194,969 | 2,298 | 4.71 | % | ||||||
| Subordinated debentures | 99,252 | 1,471 | 5.86 | % | 98,972 | 1,582 | 6.25 | % | 98,126 | 1,763 | 7.19 | % | ||||||
| Total interest bearing liabilities | $ | 10,272,988 | $ | 47,577 | 1.86 | % | $ | 10,001,093 | $ | 52,265 | 2.07 | % | $ | 10,306,849 | $ | 53,522 | 2.11 | % |
| Noninterest bearing demand deposits | 2,963,136 | 2,999,048 | 2,886,746 | |||||||||||||||
| Total funding liabilities/cost of funds | $ | 13,236,124 | 1.45 | % | $ | 13,000,141 | 1.60 | % | $ | 13,193,595 | 1.65 | % | ||||||
| Net interest income/net interest spread | $ | 119,291 | 2.77 | % | $ | 113,508 | 2.54 | % | $ | 119,608 | 2.79 | % | ||||||
| Net interest margin | 3.31 | % | 3.16 | % | 3.39 | % | ||||||||||||
| Cost of deposits: | ||||||||||||||||||
| Noninterest bearing demand deposits | $ | 2,963,136 | $ | — | — | % | $ | 2,999,048 | $ | — | — | % | $ | 2,886,746 | $ | — | — | % |
| Interest bearing deposits | 9,378,886 | 41,113 | 1.76 | % | 9,095,400 | 45,428 | 1.98 | % | 9,202,897 | 46,847 | 2.06 | % | ||||||
| Total deposits | $ | 12,342,022 | $ | 41,113 | 1.34 | % | $ | 12,094,448 | $ | 45,428 | 1.49 | % | $ | 12,089,643 | $ | 46,847 | 1.57 | % |
Table Page 4
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Three Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AVERAGE BALANCES: | 3/31/2020 | 12/31/2019 | % change | 3/31/2019 | % change | ||||||||
| Loans receivable, including loans held for sale | $ | 12,259,848 | $ | 12,036,477 | 2 | % | $ | 12,088,169 | 1 | % | |||
| Investments | 2,231,342 | 2,219,502 | 1 | % | 2,233,272 | — | % | ||||||
| Interest earning assets | 14,491,190 | 14,255,979 | 2 | % | 14,321,441 | 1 | % | ||||||
| Total assets | 15,446,807 | 15,228,488 | 1 | % | 15,290,338 | 1 | % | ||||||
| Interest bearing deposits | 9,378,886 | 9,095,400 | 3 | % | 9,202,897 | 2 | % | ||||||
| Interest bearing liabilities | 10,272,988 | 10,001,093 | 3 | % | 10,306,849 | — | % | ||||||
| Noninterest bearing demand deposits | 2,963,136 | 2,999,048 | (1 | )% | 2,886,746 | 3 | % | ||||||
| Stockholders’ equity | 2,027,595 | 2,034,231 | — | % | 1,920,492 | 6 | % | ||||||
| Net interest earning assets | 4,218,202 | 4,254,886 | (1 | )% | 4,014,592 | 5 | % | ||||||
| LOAN PORTFOLIO COMPOSITION: | 3/31/2020 | 12/31/2019 | % change | 3/31/2019 | % change | ||||||||
| Commercial loans | $ | 3,067,132 | $ | 2,719,818 | 13 | % | $ | 2,330,776 | 32 | % | |||
| Real estate loans | 8,681,222 | 8,666,901 | — | % | 8,716,128 | — | % | ||||||
| Consumer and other loans | 835,062 | 889,288 | (6 | )% | 1,007,100 | (17 | )% | ||||||
| Loans, net of deferred loan fees and costs | 12,583,416 | 12,276,007 | 3 | % | 12,054,004 | 4 | % | ||||||
| Allowance for credit losses | (144,923 | ) | (94,144 | ) | 54 | % | (94,217 | ) | 54 | % | |||
| Loan receivable, net | $ | 12,438,493 | $ | 12,181,863 | 2 | % | $ | 11,959,787 | 4 | % | |||
| REAL ESTATE LOANS BY PROPERTY TYPE: | 3/31/2020 | 12/31/2019 | % change | 3/31/2019 | % change | ||||||||
| Retail buildings | $ | 2,314,885 | $ | 2,298,872 | 1 | % | $ | 2,345,411 | (1 | )% | |||
| Hotels/motels | 1,706,082 | 1,709,189 | — | % | 1,692,193 | 1 | % | ||||||
| Gas stations/car washes | 852,077 | 844,081 | 1 | % | 964,706 | (12 | )% | ||||||
| Mixed-use facilities | 770,825 | 785,882 | (2 | )% | 746,288 | 3 | % | ||||||
| Warehouses | 1,024,832 | 1,030,876 | (1 | )% | 951,141 | 8 | % | ||||||
| Multifamily | 481,425 | 465,397 | 3 | % | 460,514 | 5 | % | ||||||
| Other | 1,531,096 | 1,532,604 | — | % | 1,555,875 | (2 | )% | ||||||
| Total | $ | 8,681,222 | $ | 8,666,901 | — | % | $ | 8,716,128 | — | % | |||
| DEPOSIT COMPOSITION | 3/31/2020 | 12/31/2019 | % change | 3/31/2019 | % change | ||||||||
| Noninterest bearing demand deposits | $ | 3,010,143 | $ | 3,108,687 | (3 | )% | $ | 2,948,751 | 2 | % | |||
| Money market and other | 4,851,000 | 3,985,556 | 22 | % | 3,086,920 | 57 | % | ||||||
| Saving deposits | 272,577 | 274,151 | (1 | )% | 223,562 | 22 | % | ||||||
| Time deposits | 4,702,847 | 5,158,970 | (9 | )% | 5,989,963 | (21 | )% | ||||||
| Total deposit balances | $ | 12,836,567 | $ | 12,527,364 | 2 | % | $ | 12,249,196 | 5 | % | |||
| DEPOSIT COMPOSITION (%) | 3/31/2020 | 12/31/2019 | 3/31/2019 | ||||||||||
| Noninterest bearing demand deposits | 23.5 | % | 24.8 | % | 24.1 | % | |||||||
| Money market and other | 37.8 | % | 31.8 | % | 25.2 | % | |||||||
| Saving deposits | 2.1 | % | 2.2 | % | 1.8 | % | |||||||
| Time deposits | 36.6 | % | 41.2 | % | 48.9 | % | |||||||
| Total deposit balances | 100.0 | % | 100.0 | % | 100.0 | % |
Table Page 5
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
| CAPITAL RATIOS: | 3/31/2020 | 12/31/2019 | 3/31/2019 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total stockholders’ equity | $ | 2,018,088 | $ | 2,036,011 | $ | 1,946,211 | |||||||||
| Common equity tier 1 ratio | 11.44 | % | 11.76 | % | 11.59 | % | |||||||||
| Tier 1 risk-based capital ratio | 12.19 | % | 12.51 | % | 12.36 | % | |||||||||
| Total risk-based capital ratio | 13.08 | % | 13.23 | % | 13.10 | % | |||||||||
| Tier 1 leverage ratio | 10.88 | % | 11.22 | % | 10.66 | % | |||||||||
| Total risk weighted assets | $ | 13,350,246 | $ | 13,208,299 | $ | 12,816,917 | |||||||||
| Book value per common share | $ | 16.38 | $ | 16.19 | $ | 15.37 | |||||||||
| Tangible common equity to tangible assets ^1^ | 9.92 | % | 10.27 | % | 9.84 | % | |||||||||
| Tangible common equity per share ^1^ | $ | 12.52 | $ | 12.40 | $ | 11.59 | |||||||||
| ^1^Tangible common equity to tangible assets is a non-GAAP financial measure that represents common equity less goodwill and core deposit intangible assets, net divided by total assets less goodwill and core deposit intangible assets, net. Management reviews tangible common equity to tangible assets in evaluating the Company’s capital levels and has included this ratio in response to market participant interest in tangible common equity as a measure of capital. | |||||||||||||||
| Three Months Ended | |||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES CHANGES: | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||
| Balance at beginning of period | $ | 94,144 | $ | 93,882 | $ | 94,066 | $ | 94,217 | $ | 92,557 | |||||
| CECL day 1 adoption impact | 26,200 | — | — | — | — | ||||||||||
| Provision for credit losses | 28,000 | 1,000 | 2,100 | 1,200 | 3,000 | ||||||||||
| Recoveries | 2,536 | 939 | 780 | 725 | 1,292 | ||||||||||
| Charge offs | (5,957 | ) | (1,677 | ) | (2,602 | ) | (2,076 | ) | (1,754 | ) | |||||
| PCI allowance adjustment | — | — | (462 | ) | — | (878 | ) | ||||||||
| Balance at end of period | $ | 144,923 | $ | 94,144 | $ | 93,882 | $ | 94,066 | $ | 94,217 | |||||
| Net charge offs/average loans receivable (annualized) | 0.11 | % | 0.02 | % | 0.06 | % | 0.05 | % | 0.02 | % | |||||
| Three Months Ended | |||||||||||||||
| NET CHARGED OFFS (RECOVERIES) LOANS BY TYPE: | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||
| Real estate loans | $ | 2,230 | $ | 203 | $ | 951 | $ | (388 | ) | $ | (1,067 | ) | |||
| Commercial loans | 676 | 245 | 596 | 1,399 | 1,250 | ||||||||||
| Consumer loans | 515 | 290 | 275 | 340 | 279 | ||||||||||
| Total net charge offs | $ | 3,421 | $ | 738 | $ | 1,822 | $ | 1,351 | $ | 462 |
Table Page 6
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| NONPERFORMING ASSETS: | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Loans on nonaccrual status 3 | 72,639 | $ | 54,785 | $ | 42,235 | $ | 64,934 | $ | 86,637 | |||||
| Delinquent loans 90 days or more on accrual status | 7,547 | 398 | 353 | 387 | ||||||||||
| Accruing troubled debt restructured loans | 35,709 | 34,717 | 40,731 | 45,204 | ||||||||||
| Total nonperforming loans | 98,041 | 77,350 | 106,018 | 132,228 | ||||||||||
| Other real estate owned | 24,091 | 19,374 | 5,644 | 6,258 | ||||||||||
| Total nonperforming assets | 141,925 | $ | 122,132 | $ | 96,724 | $ | 111,662 | $ | 138,486 | |||||
| Nonperforming assets/total assets | % | 0.78 | % | 0.63 | % | 0.73 | % | 0.90 | % | |||||
| Nonperforming assets/loans receivable & OREO | % | 0.99 | % | 0.80 | % | 0.93 | % | 1.15 | % | |||||
| Nonperforming assets/total capital | % | 6.00 | % | 4.76 | % | 5.60 | % | 7.12 | % | |||||
| Nonperforming loans/loans receivable | % | 0.80 | % | 0.64 | % | 0.89 | % | 1.10 | % | |||||
| Nonaccrual loans/loans receivable | % | 0.45 | % | 0.35 | % | 0.54 | % | 0.72 | % | |||||
| Allowance for credit losses/loans receivable | % | 0.77 | % | 0.78 | % | 0.79 | % | 0.78 | % | |||||
| Allowance for credit losses/nonaccrual loans | % | 171.84 | % | 222.28 | % | 144.86 | % | 108.75 | % | |||||
| Allowance for credit losses/nonperforming loans | % | 96.03 | % | 121.37 | % | 88.73 | % | 71.25 | % | |||||
| Allowance for credit losses/nonperforming assets | % | 77.08 | % | 97.06 | % | 84.24 | % | 68.03 | % | |||||
| 3 Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling 28.8 million,28.1 million, 37.3 million, 32.1 million, and 30.5 million at March 31, 2020, December 31, 2019, September 30, 2019, June 30, 2019, and March 31, 2019, respectively. | ||||||||||||||
| NONACCRUAL LOANS BY TYPE: | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||
| Real estate loans | 56,787 | $ | 40,935 | $ | 27,920 | $ | 42,921 | $ | 58,030 | |||||
| Commercial loans | 10,893 | 11,242 | 18,997 | 27,042 | ||||||||||
| Consumer loans | 2,957 | 3,073 | 3,016 | 1,565 | ||||||||||
| Total nonaccrual loans | 72,639 | $ | 54,785 | $ | 42,235 | $ | 64,934 | $ | 86,637 | |||||
| BREAKDOWN OF ACCRUING TROUBLED DEBT RESTRUCTURED LOANS: | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||
| Retail buildings | 5,014 | $ | 4,215 | $ | 3,221 | $ | 2,919 | $ | 2,965 | |||||
| Gas stations/car washes | — | 233 | 241 | 255 | ||||||||||
| Mixed-use facilities | 3,175 | 3,200 | 3,223 | 3,254 | ||||||||||
| Warehouses | 10,381 | 10,449 | 11,246 | 11,315 | ||||||||||
| Other 5 | 17,938 | 17,614 | 23,102 | 27,415 | ||||||||||
| Total | 45,860 | $ | 35,709 | $ | 34,717 | $ | 40,731 | $ | 45,204 | |||||
| 5 Includes commercial business, consumer, and other loans |
All values are in US Dollars.
Table Page 7
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE: | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| 30 - 59 days | $ | 37,866 | $ | 14,433 | $ | 25,281 | $ | 17,913 | $ | 33,688 |
| 60 - 89 days | 2,605 | 4,712 | 4,535 | 1,295 | 1,227 | |||||
| Total | $ | 40,471 | $ | 19,145 | $ | 29,816 | $ | 19,208 | $ | 34,915 |
| ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE BY TYPE: | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | |||||
| Real estate loans | $ | 23,753 | $ | 7,689 | $ | 20,572 | $ | 9,794 | $ | 13,695 |
| Commercial loans | 4,583 | 692 | 2,282 | 1,832 | 3,085 | |||||
| Consumer loans | 12,135 | 10,764 | 6,962 | 7,582 | 18,135 | |||||
| Total | $ | 40,471 | $ | 19,145 | $ | 29,816 | $ | 19,208 | $ | 34,915 |
| CRITICIZED LOANS: | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | |||||
| Special mention | $ | 122,279 | $ | 141,452 | $ | 139,848 | $ | 186,485 | $ | 205,373 |
| Substandard | 278,771 | 259,278 | 268,605 | 323,841 | 352,633 | |||||
| Doubtful/Loss | 12 | 13 | 17 | 1 | 569 | |||||
| Total criticized loans | $ | 401,062 | $ | 400,743 | $ | 408,470 | $ | 510,327 | $ | 558,575 |
Table Page 8
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
| Reconciliation of GAAP financial measures to non-GAAP financial measures: | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended | |||||||||
| 3/31/2020 | 12/31/2019 | 3/31/2019 | |||||||
| RETURN ON AVERAGE TANGIBLE COMMON EQUITY | |||||||||
| Average stockholders’ equity | $ | 2,027,595 | $ | 2,034,231 | $ | 1,920,492 | |||
| Less: Goodwill and core deposit intangible assets, net | (476,053 | ) | (476,596 | ) | (478,309 | ) | |||
| Average tangible common equity | $ | 1,551,542 | $ | 1,557,635 | $ | 1,442,183 | |||
| Net income | $ | 25,953 | $ | 43,009 | $ | 42,758 | |||
| Return on average tangible common equity (annualized) | 6.69 | % | 11.04 | % | 11.86 | % | |||
| Three Months Ended | |||||||||
| 3/31/2020 | 12/31/2019 | 3/31/2019 | |||||||
| TANGIBLE COMMON EQUITY | |||||||||
| Total stockholders’ equity | $ | 2,018,088 | $ | 2,036,011 | $ | 1,946,211 | |||
| Less: Goodwill and core deposit intangible assets, net | (475,752 | ) | (476,283 | ) | (477,954 | ) | |||
| Tangible common equity | $ | 1,542,336 | $ | 1,559,728 | $ | 1,468,257 | |||
| Total assets | $ | 16,021,434 | $ | 15,667,440 | $ | 15,398,669 | |||
| Less: Goodwill and core deposit intangible assets, net | (475,752 | ) | (476,283 | ) | (477,954 | ) | |||
| Tangible assets | $ | 15,545,682 | $ | 15,191,157 | $ | 14,920,715 | |||
| Common shares outstanding | 123,169,404 | 125,756,543 | 126,635,584 | ||||||
| Tangible common equity to tangible assets | 9.92 | % | 10.27 | % | 9.84 | % | |||
| Tangible common equity per share | $ | 12.52 | $ | 12.40 | $ | 11.59 | |||
| Three Months Ended | |||||||||
| 3/31/2020 | 12/31/2019 | 3/31/2019 | |||||||
| PRE-TAX PRE-PROVISION INCOME | |||||||||
| Net income | $ | 25,953 | $ | 43,009 | $ | 42,758 | |||
| Add back - tax provision | 6,462 | 12,049 | 14,439 | ||||||
| Add back - provision for credit losses | 28,000 | 1,000 | 3,000 | ||||||
| Pre-tax pre-provision income | $ | 60,415 | $ | 56,058 | $ | 60,197 |
Table Page 9
Exhibit
News Release
HOPE BANCORP DECLARES QUARTERLY CASH DIVIDEND OF $0.14 PER SHARE
LOS ANGELES - April 28, 2020 - Hope Bancorp, Inc. (NASDAQ: HOPE) today announced that its Board of Directors declared a quarterly cash dividend of $0.14 per common share. The dividend is payable on or about May 22, 2020 to all stockholders of record as of the close of business on May 8, 2020.
Investor Conference Call
The Company previously announced that it will host an investor conference call on Wednesday, April 29, 2020 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its first quarter ended March 31, 2020. Investors and analysts are invited to access the conference call by dialing 866-235-9917 (domestic) or 412-902-4103 (international) and asking for the “Hope Bancorp Call.” A presentation to accompany the earnings call will be available at the Investor Relations section of Hope Bancorp’s website at www.ir-hopebancorp.com. Other interested parties are invited to listen to a live webcast of the call available at the Investor Relations section of Hope Bancorp’s website. After the live webcast, a replay will remain available in the Investor Relations section of Hope Bancorp’s website for one year. A telephonic replay of the call will be available at 877-344-7529 (domestic) or 412-317-0088 (international) for one week through May 6, 2020, replay access code 10142677.
About Hope Bancorp, Inc.
Hope Bancorp, Inc. is the holding company of Bank of Hope, the first and only super regional Korean-American bank in the United States with $16.0 billion in total assets as of March 31, 2020. Headquartered in Los Angeles and serving a multi-ethnic population of customers across the nation, Bank of Hope operates 58 full-service branches in California, Washington, Texas, Illinois, New York, New Jersey, Virginia, Georgia and Alabama. The Bank also operates SBA loan production offices in Seattle, Denver, Dallas, Atlanta, Portland, Oregon, New York City, Northern California and Houston; commercial loan production offices in Northern California and Seattle; residential mortgage loan production offices in Southern California; and a representative office in Seoul, Korea. Bank of Hope specializes in core business banking products for small and medium-sized businesses, with an emphasis in commercial real estate and commercial lending, SBA lending and international trade financing. Bank of Hope is a California-chartered bank, and its deposits are insured by the FDIC to the extent provided by law. Bank of Hope is an Equal Opportunity Lender. For additional information, please go to bankofhope.com. By including the foregoing website address link, the Company does not intend to and shall not be deemed to incorporate by reference any material contained or accessible therein.
Contacts:
| Alex Ko<br><br>EVP & Chief Financial Officer<br><br>213-427-6560<br><br>alex.ko@bankofhope.com | Angie Yang<br><br>SVP, Director of Investor Relations &<br><br>Corporate Communications<br><br>213-251-2219<br><br>angie.yang@bankofhope.com |
|---|
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hope2020q1earningsconfer
2020 First Quarter Earnings Conference Call Wednesday, April 29, 2020 1
Forward Looking Statements & Additional Disclosures This presentation may contain statements regarding future events or the future financial performance of the Company that constitute forward‐looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward‐looking statements relate to, among other things, expectations regarding the business environment in which we operate, projections of future performance, perceived opportunities in the market, and statements regarding our business strategies, objectives and vision. Forward‐ looking statements include, but are not limited to, statements preceded by, followed by or that include the words “will,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions. With respect to any such forward‐looking statements, the Company claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. The Company’s actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in any forward‐looking statements. The risks and uncertainties include, but are not limited to: possible deterioration in economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset‐liability matching risk; liquidity risks; risk of significant non‐earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; the failure of or changes to assumptions and estimates underlying the Company’s allowances for loan losses, including the timing and effects of the implementation of the current expected credit losses model; and regulatory risks associated with current and future regulations, and the COVID‐19 pandemic and its impact on our financial position, results of operations, liquidity, and capitalization. For additional information concerning these and other risk factors, see the Company’s most recent Annual Report on Form 10‐K. The Company does not undertake, and specifically disclaims any obligation, to update any forward‐looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law. 2
Q1 2020 Financial Highlights Net income of $26.0 million, or $0.21 per diluted common share, including $28.0 million provision Net for credit losses with the implementation of CECL Pre‐provision net interest income increased 5% Q‐o‐Q Income Earnings & PTPP income increased 8% Q‐o‐Q $26.0MM Noninterest expense well contained outside of seasonal factors and representing 1.87% of average Profitability assets Net interest margin expansion of 15bps Q‐o‐Q, benefiting from outsized purchase accounting accretion Diluted New loan originations funded of $625 million reflects well‐balanced mix of loans EPS Loan CRE loans accounted for 56% of new loan production; C&I 37%; and residential mortgage & consumer 7% $0.21 Production Loans receivable increased 10% annualized with vast majority of growth in commercial loans Total deposits increased 10% annualized and continued the trend of favorable mix shift to lower‐ Gross cost deposits Increases in lower‐cost core deposits along with decreases in higher‐cost time deposits Loans Deposits Cost of deposits decreased 15bps Q‐o‐Q Company continues to benefit from CD repricing gap as time deposits continue to renew at $12.6B significantly lower rates Overall asset quality remains healthy Total criticized loans stable Q‐o‐Q Deposits Nonperforming loans increased by $21 million Q‐o‐Q largely driven by reclassification of purchased $12.8B Asset Quality credit deteriorated (“PCD”) loans due to adoption of CECL Charge offs of $4.7 million of specific reserves held against PCD loans that were reclassified with CECL implementation resulted in total net charge offs of $3.4 million 3
Loan Production & Portfolio Trends New Loan Originations Funded New loan originations funded of $625 million 5.52% 5.46% resulting in 2.5% growth in loans receivable Q‐o‐Q, ($ millions) 5.22% 4.97% 4.64% 4.79% 4.72% or 10% annualized 4.37% 3.98% $847.6 Aggregate payoffs and paydowns remained at $792.3 $784.1 $764.3 $69 higher‐than‐usual levels at $624 million, versus $667.3 $693.9 $182 $168 $181 $62 $266 $624.5 $668 million in 4Q19 $167 $503.9 $42 $138 $442.0 $236 $285 $75 $283 $234 $155 $71 Well diversified mix of loan originations $135 $176 $478 $513 representing targeted mix of higher‐yielding loans $347 $325 $346 $349 $348 $236 $253 56% CRE / 37% C&I / 7% Consumer 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 Decrease in average rate on new loan production CRE C&I Consumer Average Rate reflects extremely competitive business environment Loan Portfolio Composition Continued strength in C&I production reflects 4% 7% 7% ongoing success with banking middle‐market 19% 22% 24% commercial borrowers 77% 71% 69% SBA loan production of $50 million of which $22 million was 7(a) 9/30/2016 12/31/2019 3/31/2020 (First quarter after MOE) 4
COVID-19 Response Pandemic Response Bank of Hope’s Pandemic Adjusted Branch Operations Response Plan activated mid‐ Jan well in advance of Corporate/Non‐Retail Offices national declaration of Reduction of operating hours COVID‐19 Pandemic Temporary closure of Community Aid Pandemic Response Team branches in close proximity Social distancing procedures closely monitoring situation, to another branch implemented identifying issues and Social distancing procedures Enabled majority of Donating 20,000+ KN95 masks developing responses to implemented employees with remote work to various community reduce risks related to capabilities organizations COVID‐19 Installation of sneeze guards at teller stations and Implemented 50/50 remote •Senior nursing homes customer service areas work rotation strategy •Hospital/medical centers Branch staff equipped with •Community support organizations facial masks and face shields Highest Priority Protecting the health and safety of employees and customers, and risk mitigation of operations 5
COVID-19 Customer Support SBA’s Paycheck Protection Commercial Borrowers Consumers Program (“PPP”) •Upon request, providing • Residential Mortgage – Upon •Began accepting applications short‐term modifications for request, providing temporary 4/6/20 COVID‐19 impacted forbearance plans for COVID‐ borrowers – interest only or 19 impacted borrowers • Received more than 4,200 PPP payment deferrals initially for 3 months; Late applications from customers charges waived; and Credit to date •Have provided commercial reporting suspended during forbearance period loan modifications aggregating •As of 4/24/20, have processed 2% of total loans outstanding 2,681 applications, as of 3/31/20 – primarily in • Credit Card – Upon request, aggregating approximately hotel/ motel and retail deferring minimum payments $405 million in government portfolios for up to 2 billing cycles relief funding without penalty; Accruing finance charges added to outstanding credit card •Reinforced team with staff balance; Credit reporting from other areas of the bank suspended during the period working around the clock to help as many customers as possible for the 2nd round of funding 6
Commercial Real Estate Portfolio (as of March 31, 2020) Comm'l Real Estate Loan by Property Type Top 7 Comm'l Real Estate Loan by State Special Use & Other $304M 3.5% IL 2% Church Other CRE Other $337M $426M AZ 5% 3.9% 4.9% 2% NJ 3% TX Office Retail‐Multi $460M $1.75B 4% 5.3% 20.2% WA Multifamily 5% $481M 5.5% Retail –Single New York 11% $562M Hotel & Motel California 6.5% $1.71B 68% 19.7% Mixed Use $771M 8.9% Gas Station & Industrial & Car Wash Warehouse $852M $1.02B 9.8% 11.8% 7
CRE Portfolio Details LTV Distribution of Total CRE Loans Avg Size, LTV & DCR of Total CRE Loans Originated Since 2019 Originated Since 2019 75%+ Weighted Avg Loan Weighted 4% ($ in millions) Outstanding Avg LTV Size $ Avg DCR 70% ‐ 75% $ % 6% Under 50% Hotel & Motel 284.72 2.91 54.07 2.16 24% Multi‐tenant Retail 284.90 2.41 55.47 1.71 $2.25 Million Industrial & Warehouse 251.19 2.96 58.55 2.14 65% ‐ 70% Avg. Size Mixed Use 175.56 2.09 56.36 1.60 26% 56.95% Gas Station & Car Wash 144.56 2.26 61.48 1.93 Weight. Avg. LTV 1.93x Single‐tenant Retail 129.37 2.23 60.99 2.28 50% ‐ 55% Office 98.80 2.10 58.37 1.81 Weight. Avg. DCR 13% Multi‐family 96.53 1.51 54.07 1.48 Special Use & Other 139.89 1.46 56.25 2.15 60% ‐ 65% 55% ‐ 60% 15% 12% Total 1,605.53 2.25 56.95% 1.93 Multi‐tenant Retail Properties Hotel/Motel CRE Properties • Multi‐tenant retail CRE totaled $1.75 billion as of 3/31/20 and accounted • Hotel/Motel CRE totaled $1.71 billion as of 3/31/20 and accounted for for 18.6% of loans receivable 13.6% of loans receivable • Retail portfolio largely represents “strip mall” type of properties (not • 73% of Hotel/Motel portfolio represented by flagged properties shopping malls), much of which is comprised of service oriented businesses • Majority of Hotel/Motel properties are limited service facilities – traditionally has been less impacted by e‐commerce • 93% of Hotel/Motel exposure located within Bank of Hope’s primary MSAs • Representative anchor tenants = Local supermarket • Majority of the portfolio with personal guarantees • ACL coverage ratio of 1.18% for Multi‐tenant Retail CRE portfolio • ACL coverage ratio of 0.92% for Hotel/Motel CRE portfolio 8
C&I Portfolio (as of March 31, 2020) C&I by Loan Type C&I by Business Type Comm'l Term Wholesale Trade Comm'l Line Loan $577M of Credit $706M Finance and Insurance 18.8% $1.01B 23.0% $849M 33.1% 27.7% Retail Trade Others Syndicated & $410M Comm'l $156M Leverage 13.4% Leasing 5.1% Lending $12M $482M Arts, 0.4% Entertainment, Warehouse 15.7% Manufacturing and Recreation Line of Credit $360M SBA Loan $47M $439M Services 11.8% $123M 1.6% 14.3% $269M 4.0% Trade 8.8% Finance Transportation $142M and Warehousing 4.6% Asset Based Lending LOC $105M Health Care and $145M 3.4% Social Assistance 4.7% $159M 5.2% Information $130M 4.3% 9
Allowance for Credit Losses Reserve Build for CECL Moody’s Baseline V2 Scenario Assumptions • U.S. Growth –Economy enters sudden sharp recession due to ($ thousands) COVID‐19 crisis, turmoil in equity markets and plunge in global oil prices with spike in unemployment; GDP forecasted to decline on an annualized basis of 2.5% in 1Q20 and 18.3% in 2Q20 • Inflation –Elevated recession risks as unemployment rises, • New Loans leaving households cautious about spending, leading to slower • Changes in credit quality consumer price growth (i.e. DCR, LTV, etc.) • • CECL Day 1 Employment –Sharp jump in unemployment rate in 2Q20 averaging 8.7% transition • Aging of existing $144,923 adjustment portfolio • Monetary Policy –10‐year Treasury yield expected to average 0.77% in 4Q20; Fed expected to keep Fed Funds rate unchanged • Includes ACL for • Charge offs and 1.15% of loans loans Recoveries until 2022 0.77% of loans • CRE –Prices decline 15% in 2020 • Changes to macro‐ • Corporate –Corporate equipment investment forecast to fall economic variables & other qualitative factors 8.5% in 2020 related to COVID‐19 • Residential –House pricing expected to decrease from late 2020 through 3Q21 ACL 3/31/20 • Consumer –Real consumer spending forecast to drop 0.8% & Portfolio Changes annualized in 1Q20 and 13.7% in 2Q20 Q1 2020 Highlights ACL & Coverage Ratio $144,923 ($ thousands) • Allowance for CECL Day 1 adoption increased to $120MM which was comprised of ACL for $120,344 loans, impairment, and qualitative adjustment of $84MM, $11MM, and $25MM, $92,557 $94,144 respectively $84,541 1.15% • Economic Factors & Updates, adoption of macro‐economic variables based on Moody’s 0.98% Baseline V2 scenario on top of bank’s existing portfolio and Portfolio Changes including new 0.76% 0.77% 0.77% loan production, pay offs, and charge offs & recoveries required an addition of $24.6MM on top of Day 1 requirement • Provision for credit losses of $28MM for Q1 resulted in $145MM of ACL under CECL and 4Q17 4Q18 4Q19 Day 11Q20 coverage ratio to loans receivable increased from 0.77% as of 12/31/19 to 1.15% as of Jan 1 2020 03/31/20 ACL Coverage Ratio 10
Allocation of Allowance by Loan Type Allowance of Loan & Allocation for Credit Losses ($ thousands) Lease Losses (ALLL) for Current Expected Credit Loss (CECL) December 31, 2019 January 1, 2020 March 31, 2020 CECL Adoption ‐ Day 1 Coverage Coverage Coverage Loan Type $ Amount $ Amount $ Amount Ratio Ratio Ratio Commercial Real Estate $ 53,593 0.62% $ 81,385 0.94% $ 94,680 1.09% Residential $ 204 0.39% $ 227 0.43% $ 391 0.69% Commercial $ 51,712 0.62% $ 79,194 0.95% $ 92,637 1.11% Construction $ 1,677 0.57% $ 1,964 0.66% $ 1,652 0.59% Commercial & Industry $ 33,032 1.21% $ 32,010 1.18% $ 42,935 1.40% Residential Mortgage $ 5,942 0.71% $ 5,387 0.65% $ 5,776 0.73% Consumer $ 1,577 2.87% $ 1,563 2.85% $ 1,532 3.18% Total Allowance $ 94,144 0.77% $ 120,345 0.98% $ 144,923 1.15% Coverage Ratio to Loans Receivable 0.77% 0.98% 1.15% 11
Asset Quality Nonperforming Assets Provision Expense & Net Charge Offs ($ millions) ($ millions) $28.0 $137.9 $138.5 $141.9 $8.3 $129.1 $6.3 $122.1 $8.7 $118.2 $113.0 $111.7 $23.0 0.22% $129.6 $9.0 $7.8 $132.2 $5.6 $96.7 $24.1 0.11% $120.4 $118.9 0.05% 0.06% $109.2 $106.0 0.02% 0.03% 0.02% 0.02% $105.2 $19.4 $98.0 ‐0.04% 0.95% 0.90% $77.4 0.87% 0.89% $7.3 0.74% 0.78% 0.73% 0.78% $2.5 0.63% $2.3 $2.8 $3.0 $1.2 $2.1 $1.0 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 NPLs OREO NPAs/Total Assets Provision Expense Net Charge Offs (Recoveries) (annualized) Criticized Loans Underlying health of broader portfolio remains solid as ($ millions) of 3/31/2020 Total criticized loans stable Q‐o‐Q $540.7 $520.5 $558.6 $497.2 $481.4 $510.3 Increase in nonperforming loans includes $14.7 million $353.2 $344.6 $302.7 $408.5 $400.7 $401.1 $357.7 $318.3 $323.8 related to reclassification of PCD (purchased credit $268.6 $259.3 $278.8 deteriorated) loans due to adoption of new CECL 4.79% 4.63% 4.26% 4.36% 3.98% 4.26% accounting standards 3.37% 3.26% 3.19% $196.1 $139.5 $217.8 $163.1 $205.4 $186.5 $139.8 $141.5 $122.3 Credit losses continued to be nominal, with net charge offs of $3.4 million, or 11bps of average loans on an 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 annualized basis Classified 1Q20 includes charge off of $4.7 million specific reserves Special Mention held against PCD loans reclassified under the new CECL methodology Total Criticized Loans as a % of Gross Loans 12
Net Interest Income and Margin Key Net Interest Income Drivers Net Interest Income & NIM Average Loan Yield & Average 1M LIBOR Rate ($ millions) 5.31% 5.32% 5.27% 5.16% 5.16% 5.21% $122.8 $123.1 5.04% 5.06% $121.9 5.04% $120.1 $119.6 $119.3 2.50% $117.2 $116.3 2.35% 2.44% 2.18% 1.79% 1.41% $113.5 1.97% 3.66% 3.61% 3.47% 3.41% 3.39% 1.66% 2.11% 3.31% 3.25% 3.16% 3.31% 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 Avg Loan Yield Avg 1M LIBOR Rate Net Interest Income NIM Average Interest Bearing Deposits & 1Q20 net interest margin increased 15bps Q‐o‐Q Cost of Deposits benefiting from additional purchase accounting discount ($ billions) $9.4 accretion related to the payoff of an acquired loan $9.2 $9.1 $9.1 $8.8 $9.0 $9.1 $8.5 $8.2 1.57% 1.62% 1.62% Core net interest margin (excluding acquisition 1.40% 1.49% 1.24% 1.34% 1.06% accounting adjustments) increased 8bps Q‐o‐Q largely 0.91% due to the reduction in deposit costs NIM compression expected for 2Q20 with full quarter’s 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 impact of 150bps Fed Funds rate cuts in Mar 2020, Average Interest Bearing Deposits Cost of Deposits partially offset by considerable decrease in total cost of deposit below 100 basis points 13
Noninterest Income Noninterest Income ($ millions) Noninterest income stable at $13.3 $19.9 million, up modestly from 4Q19 Decrease in service fees reflect reduction $15.3 in NSF and analysis fees $10.4 $13.4 $13.0 $13.0 $13.3 Sold $73.9 million in residential loans and $12.3 $11.6 $6.7 $11.4 recognized gain on sale income of $1.86 $6.1 million $6.6 $7.3 $1.2 $6.8 $7.5 $0.4 $6.2 $6.4 Other income and fees increased to $7.3 $0.5 $3.5 $3.5 million $2.3 $0.4 $1.9 $0.4 $0.7 $1.1 $0.8 $1.9 Recognized $354,000 income from fair value change of equity investments vs. loss $4.8 $4.6 $4.6 $4.6 $4.3 $4.4 $4.7 $4.5 $4.1 of $104,000 in 4Q19 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 Service fees on dep accts Gain on sale of SBA loans Gain on sale of other loans Other income and fees 14
Noninterest Expense and Efficiency Noninterest Expense and Efficiency Ratio Breakdown of Noninterest Expense and FTE ($ millions) ($ millions) $71.6 $70.8 $71.4 $72.1 $68.5 $67.5 $70.2 $70.0 $70.4 $31.1 $32.1 $29.6 $29.1 $30.5 $33.6 $30.4 $28.4 $30.6 54.06% 55.11% 54.15% 55.68% 54.42% 51.87% 52.57% 48.92% 49.38% 1,502 1,491 1,512 1,494 1,468 1,446 1,441 1,458 FTE FTE FTE FTE 1,439 FTE FTE FTE FTE FTE $39.4 $40.6 $37.0 $36.6 $40.4 $39.3 $41.6 $39.8 $42.5 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 Noninterest Expense Efficiency Ratio Compensation Other FTE Noninterest Expense to Average Assets Noninterest expense increased to $72.1 million in 1Q20 from ($ billions) $15.3 $15.4 $15.0 $15.2 $15.2 $15.2 $15.2 $70.4 million in 4Q19 $14.6 $14.2 – Higher compensation expense largely due to payroll taxes and higher seasonal expenses – FDIC assessment in 1Q20 reflects quarterly run rate – Professional fees decreased 45% Q‐o‐Q 1.93% 1.96% 1.88% – Advertising and Marketing expense down 32% Q‐o‐Q 1.80% 1.85% 1.85% 1.85% 1.85% 1.87% Annualized noninterest expense to average assets at 1.87% in 1Q20 vs. 1.85% in 4Q19 Efficiency ratio improves to 54.42% in 1Q20 vs. 55.68% in 4Q19 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 Average Assets NIE to Avg Assets Annualized 15
Deposit Trends Deposit Composition Total end‐of‐period (“EOP) deposits increased 2.5% Q‐o‐Q, or 10% annualized $12.25 Billion $12.53 Billion $12.84 Billion EOP Loan‐to‐Deposit ratio of 97.14% as of 1Q20 Positive shift in deposit mix continued with increases in 24.1% 24.8% 23.4% lower‐cost deposits and decreases in time deposits 36.6% 41.2% 48.9% – 22% increase in MMA & NOW balances Q‐o‐Q – 9% decreased in time deposits Q‐o‐Q 25.2% 31.8% 2.1% 37.8% 1.8% 2.2% Total cost of deposits decreased 15bps in 1Q20 from 4Q19 3/31/2019 12/31/2019 3/31/2020 M‐o‐M decrease in deposit costs for Mar 2020 reflects 150 bps Fed Funds rate cuts in that month DDA MMA/NOW Savings Time Deposit Cost Trend CD Originations & Maturity Schedule 1.80% Average ($ millions) Amount Blended 1.70% Rate 1.60% 1.65% 1.50% 1.63% 1.64% 1.62% Jan 2020 $518 1.72% 1.61% 1.58% 1.40% 1.54% 1.49% CD Originations and Feb 2020 $537 1.73% 1.30% 1.44% 1.43% 1.42% Renewals Mar 2020 $574 1.10% 1.20% 1.10% 1.18% Apr MTD $773 0.83% 1.00% Q2 2020 $1,460 1.98% Cost of Deposits Q3 2020 $1,265 2.19% CD Maturity Schedule Q4 2020 $893 1.91% DDA = Noninterest bearing demand deposits MMA/NOW = Money market and NOW deposits Q1 2021 $1,001 1.68% NOW = Negotiable Order of Withdrawal 16
Strong Capital & Liquidity Positions Robust Capital Position Sufficient Liquidity Sources (as of 3/31/2020) 03/31/2020 ($ Thousands) Available Borrowing Capacity 13.08% FHLB Remaining Capacity 3,201,618 11.44% 10.88% FRB Discount Window 762,103 9.92% Unsecured lines with other banks 320,000 10.00% Total Borrowing Capacity 4,283,721 Brokered Deposit Availability 688,136 6.50% (internal policy limit 15% of Total Assets) 5.00% Investment Repo Line 1,293,821 (unpledged securities 95%) Total Risk‐ Tier 1 Tier 1 Tangible Based Capital Leverage Common Common Ratio Capital Ratio Equity Ratio Equity/ No meaningful change in primary source of liquidity since COVID‐19 Tangible Assets Pandemic Capital in Excess of Minimum Standard Full participation in FRB’s PPP lending facility to fund PPP loan Minimum Guideline for Well Capitalized Institutions originations minimizes use of other secondary liquidity sources Closely monitoring liquidity position on a daily basis 17
Near-Term Outlook Actively supporting customers’ access and receipt of government’s COVID‐19 relief programs and funds Closely monitoring economy to mitigate COVID‐19 risks to operations Continuation of positive operating trends Favorable shift in mix of deposits to lower‐cost core deposits and decreasing deposit costs Concentrated focus on expense management leading to improving efficiencies Early identification and proactive management strategy to minimize COVID‐19 impact on asset quality Limiting guidance due to lack of visibility and uncertainty around severity and duration of the COVID‐19 Pandemic Managing capital position to maintain sufficient capital to support clients and communities – including prudent evaluation of quarterly dividend Committed to Building on Strong Foundation and Enhancing Long‐Term Shareholder Value With HOPE, we will get through this Together 18
2020 First Quarter Earnings Conference Call Q&A 19